By Karen Petrou
- Although a new BIS report finally takes seriously the proposition that central banks may inadvertently increase economic inequality, it goes on to dismiss it because any inequality impact is said to be short-lived thanks to fiscal policy.
- However, neither short-lived inequality nor effective fiscal clean-up is substantiated by data in the U.S.
- But, while the BIS at least acknowledges some inequality impact, the Federal Reserve is obdurate that it doesn’t make economic inequality even a little bit worse. This means prolonged policy with still more profound anti-equality impact.
It is the purpose of this blog and my new book to show not just that monetary and regulatory policy may increase economic inequality, but also that the Fed’s policies since at least 2010 in fact did so. This isn’t an academic exercise – it’s an effort to show as analytically as possible how monetary policy exacerbates inequality so monetary policy alters course before inequality’s systemic, political, and human cost grow still higher. However, disciplined analytics that power up effective advocacy must be open to correction. This blog post thus looks first at a new, if halting, acknowledgement of at least some inequality impact from the Bank for International Settlements and then the Fed’s still-stout denial that it has any responsibility for the growing U.S. wealth and income divide.
Continue reading “The Central-Bank Inequality Excuse and Why It’s No Exoneration”
By Karen Petrou
The Fed is listening. In a recent blog post, we analyzed a brand-new database which Fed staff have constructed to capture distributional wealth effects across the U.S. economy. Now, we turn to a brand new paper from the president and staff of the Federal Reserve Bank of St. Louis that not only recognizes the distributional impact of monetary policy – a Fed first – but tries to do something about it. The paper proposes an “optimal” monetary policy based on a complex model with several uncertain assumptions, no conclusion about whether it would work in concert with a still-huge Fed portfolio, and nothing more than a theoretical hypothesis. Still, it’s a start. Continue reading “In Search of Optimal, Equal Monetary Policy”
By Matthew Shaw
Absent geopolitical or market surprises, the current U.S. expansion will by summer be the longest consecutive period of economic growth on record. That’s the good news. The toxic side-effect of all this prosperity: how little of it is equitably shared and how angry that makes the majority of Americans ahead of the next election. If income and wealth growth over the 2016-2019 period tracks 2010 to 2016, then the middle class will be no better off in 2019 than 2001 even with almost a decade of aggregate growth. Continue reading “A Paradox: U.S. Growth and Who Got Left Behind”
By Matthew Shaw and Drake Palmer
Recent jobs data sparked excitement as news reports talked of how America is finally going back to work. This is understandable optimism, based as it was on a concurrent rise in labor-force participation and a drop in the government’s preferred measure of unemployment. Here, we assess whether the Fed’s “solid” and “very well performing” economy has finally allowed low-and-moderate income (LMI) households to share the prosperity rapidly pooling at the very top of the income and wealth distribution. In short, and sad to say, it isn’t – hourly pay for low-wage/low-skill workers has declined in real (i.e., inflation-adjusted) terms over the past four decades and is essentially flat since 2010. As we noted in our last blog post, wealth concentration has soared since the financial crisis. Even if a corner has now been turned for everyone else, it’s just a very tight one at the bottom of the equality canyon. Continue reading “Hard Work, Low Pay, High Costs: Life on the Ground in a “Well-Performing” Economy”